FRANKFURT AM MAIN (AFP) – Confidence among German investors slumped to its lowest level since September 2012 yesterday in a closely-watched monthly barometer, as financial players were spooked by a transatlantic war of words over trade.
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The ZEW institute’s regular poll of economic expectations for the coming months lost 7.9 points for a reading of -16.1.
ZEW President Achim Wambach pointed to “the latest escalation in the trade conflict with the United States” as a major reason for the gloomier prognosis.
The survey was conducted between May 28 and June 11, a period including last weekend’s disastrous G7 summit that saw US President Donald Trump tear up a joint communique with other leaders of advanced Western economies, citing trade differences.
Financial players’ judgements of both the current economic situation and the outlook for the coming months slipped, with both readings much worse for the 19-nation eurozone than for Germany alone.
A tit-for-tat trade battle is brewing across the Atlantic after Trump hit steel and aluminium imports with tariffs and justified them on “national security” grounds – to the outrage of historic allies like the European Union and Canada.
Both the EU and Canada have said they will hit back, spurring the US leader to vow further border taxes on car imports – potentially a heavy blow for Germany, whose car industry with its more than 800,000 employees is vital to the economy.
Closer to home, Mr Wambach pointed to “fears of policies from the new Italian government that could destabilise the financial system,” although the coalition between the anti-establishment Five Star Movement and anti-immigration League parties has moderated its tone on tax and spending issues in recent days.